May 24, 2016

This post is from our partner and SPARK Sponsor, Moven, a mobile banking system for Freelancers. Moven has partnered with Wharton Business School to research the unique personal finance and banking needs of Freelancers. If you want to help make banking better for Freelancers and have the chance to win $250, please click on this link and complete the following survey.

So you’ve taken the leap. You are now an independent worker. You are un-tethered from “the man”, “the system” and free to pursue earnings as you choose. Exciting and terrifying right? My first piece of advice? Check what’s in your wallet.

Running a successful business, whether it’s a business of one person or one hundred, requires good basic banking products. Unfortunately for independent workers, the banking world was not designed for you. Most banks have two distinct types of basic deposit and credit products: “personal” and “business”. But what about a PERSON that IS a BUSINESS? A regular personal account might not cut it. And business accounts are often too complex, expensive, and not easy to open or get approved.

Priority ONE for any independent worker is to make sure that you’ve got a basic financial structure in place to manage your new lifestyle and career path. That means a basic bank account and maybe some access to credit.

You already have a bank deposit/checking account right? Unfortunately, the bank account your parents opened for you when you were 16 may not cut it anymore. Whether you like your existing bank or not, here’s what you should be looking for in a basic bank account:

The ability to track and separate business vs. personal expenses

You’re going to need to track business vs. personal expenses for tax purposes. Does this mean you need a personal AND business account? Not necessarily. You need two spending accounts. So, you might be just fine having a personal bank account and a simple debit card for example, thus avoiding the fees and complexity of a separate business account.

When you have two spending accounts, the central key is TRACKING. Basic personal accounts like PNC Bank’s Virtual Wallet have built in online features that allow you to separate and track expenses quite easily. Tools like Quicken and Mint make tracking simple and roll up reporting from many bank accounts. Next generation mobile bank accounts like Moven, Simple, and Chime allow you to manage money on the fly effortlessly from your mobile phone. And in the case of Moven, it can also provide easy tracking and reporting on all of your accounts like Mint and Quicken.

Easy ways to deposit and access money

You’re going to be a person on the move. Constantly trying to get gigs, manage work, and expand your relationships. The last thing you need is to have your money constrained by bank branch hours. So you’ll want a bank account with strong digital services and 24/7 access.

Key features to look out for – mobile check deposit, online or mobile service support, and ATM coverage. Also you’ll want ways to move money around digitally – online bill pay and digital money transfer services. In addition to the banks mentioned above, big national players like Bank of America and Chase have strong digital money deposit, payment and support services.

It’s also worth checking out the digital only banks like Ally and CapitalOne Direct.

Low fees and few “gotcha” limits

You’ve got to be prepared for some earnings volatility. Checks may not always come in on time so managing cash flow is essential. Many bank accounts require minimum deposit sizes or balances to be in place in order to avoid significant fees (which can sometimes go up to $19-20/month...and even more for a business account). Watch out for these fees, and try to avoid them if you can.

However, do not expect “NO FEES” and don’t be fooled by this kind of marketing. There is no such thing as a “free lunch”, especially in banking. So, expect to pay some fees, but those fees should come with features that provide flexibility that your career and lifestyle will need like low/no minimum balance requirements, surcharge free ATMs, additional fees for expedited ways to receive or sending money, and strong digital services.

Now about that credit card…

...ideally you can avoid using it all together. Probably one of the worst things you can do is run up a lot of debt when you are first starting out by buying a bunch of things on credit. Ideally, you have some basic credit products only to help smooth out cash flow (i.e. only because you have expenses that you need to make while checks are clearing or you are waiting for an invoice to be paid). Cut up and throw away most of your credit cards if you can.

But if you need credit, here’s what you should be looking for basic credit needs:

Avoid ANY consumer credit card if you can

Basically, don’t get ANY of the credit cards advertised on TV or airplanes or whatever. ESPECIALLY ones that promote heavily what appears to be a sexy rewards program. Why? It’s simple, consumer credit cards with fancy rewards programs are designed to get you to use credit…A LOT. And you definitely don’t want to do that.

If you want to be able to spend money you don’t have in your deposit account, then look to a charge card vs. a credit card first. The most known one is American Express. With a charge card you can spend money you don’t have at zero interest as long as you pay off the balance each month. And this is a discipline you should be absolutely striving for.

Look at the new peer to peer lending marketplaces

If you need money to finance a project or a small consumer loan to help with short term debt, then the new digital marketplaces might provide an answer at much lower cost than a consumer credit card. Prosper, SoFi, Lending Club, AvantCredit, are the biggest ones out there and have been doing this kind of new lending the longest.

On the project financing side, Kickstarter is the king but there are lots of niche financing platforms out there for arts, music, and technology projects specifically.

The independent worker lifestyle requires a new approach to banking and personal finances. There are lots of choices out there if you look. The key is to not be complacent with what you have or just default to the big bank brands. The traditional banking world was not designed to work for the freelance lifestyle. So you’ll have to do some work to design a system that works for you.

Moven has partnered with Wharton Business School to research the unique personal finance and banking needs of Freelancers. If you want to help make banking better for Freelancers and have the chance to win $250, please click on this link and complete the following survey.